Despite fourth-quarter disruptions, Freeport McMoRan Copper & Gold (FCX) believes it is sitting in a great position. “FCX’s fourth quarter results reflect strong operating performance in the Americas and in Africa, and were unfavorably impacted by disruptions at our Grasberg operations in Indonesia,” said Richard C. Adkerson, president and CEO, Freeport McMoRan Copper & Gold.
“We are pleased to have reached agreement with the union at the Grasberg mine and with the accomplishments of our team in completing pipeline repairs. We are taking steps to restore full operations. We are continuing to advance our growth projects which are expected to result in meaningful increases to copper and molybdenum production in future periods. Our exploration programs continue to identify opportunities to grow our reserve base. We ended the year with significantly more cash than debt and have a positive outlook for the future prospects of our business.”
Consolidated sales for the year 2011 totaled 3.7 billion lb of copper, 1.4 million oz of gold and 79 million lb of molybdenum, compared with 3.9 billion lb of copper, 1.9 million oz of gold and 67 million lb of molybdenum in 2010. The estimated impact of the labor and pipeline disruptions, net to PT Freeport Indonesia, totaled 235 million lb of copper and 275,000 oz of gold for the year 2011.
Consolidated sales from mines for the year 2012 are expected to approximate 3.8 billion lb of copper, 1.2 million oz of gold and 80 million lb of molybdenum. FCX’s projected 2012 copper sales volumes are expected to be higher, compared to 2011, primarily because of higher production from North America and Indonesia, partly offset by slightly lower production in South America. Gold sales in 2012 are projected to be lower than 2011 sales because of mine sequencing in Indonesia. Molybdenum sales in 2012 are expected to be similar to 2011, with higher production from primary molybdenum mines offset by lower production from FCX’s North and South America copper mines.
FCX operates seven open-pit copper mines in North America–Morenci, Bagdad, Safford, Sierrita and Miami in Arizona, and Tyrone and Chino in New Mexico. During 2010, the company initiated plans to increase production at its North America copper mines, which had been curtailed in late 2008 because of weak market conditions. Projects included restarting milling operations and increasing mining rates at Morenci and Chino, and restarting the Miami mine. The project at Morenci is complete with an incremental impact of 125 million lb of copper per year, and the ramp-up activities at Miami and Chino are continuing. Production at Miami totaled 66 million lb of copper in 2011 and is expected to be similar in 2012. Production at Chino, which produced 69 million lb of copper in 2011, is expected to increase to approximately 200 million lb of copper per year by 2014.
FCX expects 2012 sales from North American copper mines to total 1.3 billion lb of copper, compared with 1.2 billion pounds of copper in 2011.
FCX operates four copper mines in South America–Cerro Verde in Peru and El Abra, Candelaria and Ojos del Salado in Chile. During 2011, FCX commenced production from El Abra’s newly commissioned stacking and leaching facilities to transition from production of oxide to sulfide ores. Production from the sulfide ore approximates 300 million lb/y of copper, replacing the depleting oxide copper production. The aggregate capital investment for this project is expected to total $725 million through 2015.
FCX is also engaged in pre-feasibility studies for a potential large-scale milling operation at El Abra to process additional sulfide material and to achieve higher recoveries. Positive exploration results at El Abra indicate the potential for a significant sulfide resource. Exploration activities are continuing.
At Cerro Verde, plans for a large-scale concentrator expansion continue to be advanced. The approximate $4 billion project would expand the concentrator facilities from 120,000 to 360,000 mt/d of ore and provide incremental annual production of approximately 600 million lb of copper and 15 million lb of molybdenum beginning in 2016. An environmental impact assessment was filed in fourth quarter 2011.
FCX expects South America’s 2012 sales to total 1.3 billion lb of copper and 100,000 oz of gold, similar to 2011 sales of 1.3 billion lb of copper and 101,000 oz of gold. Lower projected ore grades at Cerro Verde and Candelaria in 2012 are expected to be partly offset by higher production at El Abra.
PT Freeport Indonesia, FCX operates the world’s largest copper and gold mine in terms of reserves at its Grasberg operations in Papua, Indonesia.
FCX expects 2012 sales from Indonesia to total 930 million lb of copper and 1.1 million oz of gold for the year 2012, compared to 2011 sales of 846 million lb of copper and 1.3 million oz of gold. Gold sales in 2012 are projected to be lower than in 2011 because of mining in a lower grade section of the Grasberg mine in 2012.
FCX operates the Tenke Fungurume (Tenke) copper and cobalt mining concessions in the Katanga province of the Democratic Republic of Congo (DRC). The milling facilities at Tenke, which were designed to produce at a rate of 8,000 mt/d of ore, continue to perform above capacity, with throughput averaging 11,100 mt/d of ore per day for the year 2011. Mining rates have been increased to enable additional copper production from the initial project capacity of 250 million lb per year to approximately 290 million lb per year. FCX is undertaking a second phase of the project, which would include expanding the mill rate to 14,000 mt/d of ore and is constructing related processing facilities that would target the addition of approximately 150 million lb of copper per year. Construction activities for the approximate $850 million project, which includes mill upgrades, additional mining equipment, a new tankhouse and sulphuric acid plant expansion, are underway and are targeted for completion in 2013.
FCX expects Africa’s sales to approximate 290 million lb of copper and 25 million lb of cobalt for the year 2012, compared with 283 million lb of copper and 25 million lb of cobalt for the year 2011.
FCX is the world’s largest producer of molybdenum. FCX conducts molybdenum mining operations at its wholly owned Henderson underground mine in Colorado, is developing the Climax molybdenum mine and sells molybdenum produced from its North and South America copper mines.
Construction activities at the Climax molybdenum mine are substantially complete. FCX has invested $700 million and plans to begin production during 2012. The Climax mine is expected to ramp up to a rate of 20 million lb per year during 2013 and, depending on market conditions, may be increased to 30 million lb per year.
For the year 2012, FCX expects molybdenum sales to approximate 80 million lb (including 40 million lb from copper mines), compared with 79 million lb in 2011 (including 45 million lb from copper mines).
FCX’s capital expenditures are currently estimated to approximate $4.0 billion for the year 2012. Major projects for 2012 primarily include underground development activities at Grasberg, the expansion at Tenke Fungurume and the concentrator expansion at Cerro Verde.
